A new Tennessee law puts guardrails on manufacturer demands for dealership facility changes—and it affects how you can manage your dealer network.
Most Tennessee manufacturers don't realize they now operate under a new constraint on how they can manage their dealer networks. Buried in SB0608, signed into law on May 5, 2026, is a provision that fundamentally shifts the burden of proof when manufacturers want to force dealers to relocate or renovate their facilities.
Under the new rule in Section 2, subdivision (c)(26) of SB0608, manufacturers and distributors can no longer simply demand that dealers undertake costly facility changes. Instead, if you want to require a dealer to relocate or undergo significant facility renovation, you must affirmatively prove the demand is reasonable given current market and economic conditions.
This is a meaningful shift. Previously, dealers operated under franchise agreements that often gave manufacturers broad discretion to impose facility standards. A manufacturer could threaten franchise termination or non-renewal to compel a dealer into a multimillion-dollar renovation project, with little obligation to justify the business case. Under SB0608, that leverage is constrained.
If you manufacture or distribute motor vehicles and manage a dealer network in Tennessee, this applies to you. The provision protects small dealerships—the backbone of many manufacturer networks—from being forced into capital expenditures they cannot absorb.
The practical impact is significant. A dealer facing a $2 million facility upgrade demand now has legal grounds to challenge it if the manufacturer cannot demonstrate the renovation is reasonable given local market demand, economic conditions, and the dealer's financial capacity. That's protection dealers previously lacked.
If you're currently planning or considering facility upgrade requirements for your Tennessee dealer network, review those plans against this new standard. Document the market rationale and economic justification for any facility demands. "We want a uniform brand look" is not enough; you need to show the upgrade is reasonable given actual market conditions.
For dealers, this means you now have a legal framework to push back on unreasonable facility demands. If a manufacturer can't prove the renovation makes business sense in your market, you have grounds to resist or negotiate.
This provision became effective upon the bill becoming law on May 5, 2026. It applies to franchise agreements going forward and, in many cases, to existing agreements when manufacturers attempt to enforce facility requirements.
SB0608 is primarily motor-vehicle-focused legislation, but this dealer-protection provision has implications for how manufacturers structure their network management across Tennessee. It's a practical constraint on franchise power that both manufacturers and dealers should understand.
For a detailed, business-specific summary of how SB0608 affects your operations, resources are available through Tennessee industry associations and legal counsel specializing in franchise law.